Rise in NH home prices grabs attention of industry

One month does not a trend make. But the fact that median home prices in New Hampshire shot up at double-digit rates in October for the first time since 2004 is getting a lot of attention among homeowners and would-be buyers.

The New Hampshire Association of Realtors reported in mid-November that the median price of a single-family home sold in the state went up by 11.6 percent in October of 2012 compared to October 2011, from $190,000 to $212,000.

More New Hampshire houses were sold in every month of this year, compared to 2011, but prices kept dropping from the previous year - a decline that had become all-too familiar for Granite State homeowners since the housing market crashed in 2008.

Real estate agents have been saying that as the number of sales steadily increases, it should only be a matter of time until prices level off and then begin to rise again. That time may be at hand. The numbers for November, due in mid-December, will be watched closely, as an early winter thaw in real estate prices now appears possible.

For most of the year, the state has been stuck in a pattern of increasing sales amid declining prices. In May, for example, the market saw a spike of 27.2 percent in number of homes sales compared to May of 2011, but median prices were down 2.4 percent. The pattern continued with slight variation in June and July. In August, with sales up 21.8 percent from the previous year, median prices finally levelled off with August 2011.

In September, median sales price increased by 2.3 percent, setting the stage for October's huge numbers, with a 27 percent jump in the number of units sold, and an average 11.6 percent increase in price.

"The positive thing is that this is appearing to represent a trend as opposed to an anomaly, with unit sales increasing all year," said David Cummings, director of communications for the N.H. Association of Realtors. "We wouldn't be surprised if this represents the beginning of an upward trend in prices."

Brian Gottlob, president of PolEcon Research in Dover, said that if New Hampshire prices are rebounding, it's a rebound that is trailing the rest of the nation.

In a recent post on his blog, TrendLines, titled "The Home Price Rebound That Wasn't," he cites the Federal Housing Finance Agency home price appreciation index released on Nov. 27, which showed New Hampshire home prices declining by 1.5 percent for the third quarter, ending Sept. 30, compared to the same quarter last year, putting the state 48 out of 50 in home price appreciation. Only Rhode Island and Maine fared worse.

Other states showed prices appreciating as high as 10 percent compared to last year. As Gottlob and Cummings point out, many of those states in the West and South suffered more severe price deterioration and so had much more room for a comeback.

The NHAR uses median sale prices in its report, taking the mid-point of all sales reported, while the federal housing agency uses what is called "repeat sales indices," taking a property sold in September of 2011, for example, and comparing the price for the same property re-sold in 2012.

Gottlob said repeat sales indices are the only accurate way to measure changes in home prices. "Simply examining median sales prices doesn't account for the fact that the characteristics of the houses sold may be different (location, size, type, etc.) unless the repeat sales method is used," he said.

Cummings suggests that the resale indices are based on a relatively small number of transactions, since most properties don't change hands every 12 months.

However you want to argue September figures, the two analyses are not that far apart. While the federal agency suggests New Hampshire sales prices went down 1.5 percent in the third quarter, the state realtor's association reports an increase of about 0.5 percent for the three-month average, close enough to be within the margin of error.

While both reports suggest prices may have finally bottomed out in September, the real question is whether New Hampshire will be able to catch up to the rest of the nation, where the price recovery has been much more robust.

The October spike would suggest as much, but Gottlob is more cautious.

For several months, he has been studying the lack of job growth and population growth in the state, which unless reversed do not bode well for the real estate market over the long term.

"We know New Hampshire hasn't been adding many people, and has actually seen a little out-migration over the past couple of years," he said. "Job growth trends are not that positive. If they were, we would likely see stronger population growth. If you are missing strong job and population growth, the elements that would typically lead to stronger housing appreciation just aren't there."

Whatever that portends for the long-term, the trends from the fall of 2012 are the best signals the real estate market has seen in half a decade, said Cummings. Inventory is down, sales volume is up and prices are at least stable if not rising.

"We don't ever want to look at one month and say, 'We've got it,'" Cummings said. "But when you see the pattern that we've been seeing for the past year, then you think there's something there."